RPT-Samsung Electronics, juggling $60 bln in cash, bulks up on bonds

SEOUL, June 16 Samsung Electronics Co Ltd
is emerging as a major player in its local debt
market, buying more South Korean-issued bonds as it juggles a
$60 billion cash pile.

Samsung's push into private bank debt and government bonds
underscores the challenges faced by the electronics giant in
managing its massive cash holdings, with local banks reluctant
to overload on short-term deposits from Samsung.

The world's biggest smartphone maker bought more than
two-thirds of a 300 billion won ($294.75 million) 2-year debt
issue on Friday by Kookmin Bank, a unit of KB
Financial Group Inc, a person with direct knowledge
of the matter said.

Dealers also said the company bought nearly 300 billion won
worth of three-year treasury bonds late last month.

While it is not unusual for Samsung to buy local bonds,
dealers said it has typically bought paper issued by highly
rated government-backed financial firms like Korea Development
Bank and Korea Finance Corp.

"I think Samsung is diversifying their holdings and
spreading out their maturities," said Hanwha Securities
fixed-income analyst Kong Dong-rak.

"Samsung has to manage the cash in some way and they can't
always get the right yields and duration from the banks, so it
looks like they went to the bond market to find new avenues."

Samsung generally stays away from large acquisitions and has
been reluctant to make big shareholder payouts through dividends
or share buybacks, adding to its cash glut.

By comparison, rival Apple Inc, under pressure form
shareholders, has been returning cash through dividends and
buybacks. Apple's dividend yield is just over 2 percent, about
double that of Samsung, which increased dividends last year and
promised to pay even more in 2014.

Samsung's dividend payout ratio - or how much of its
earnings it pays out in dividends - is 7.11 percent for the past
12 months, according to Thomson Reuters data, while Apple's is
29.03 percent.

A Samsung spokeswoman said there has been no change to its
stance on ensuring stable cash management and declined to
comment further.

The company does not give a breakdown of its investments.

One official in charge of debt issuance at a private Korean
bank said Samsung's moves to broaden its portfolio stem in part
from banks' reluctance to take on too much of the electronics
giant's cash as deposits, which tend to be relatively short-term
and could pose liability management issues if the cash is
withdrawn at maturity.

"From the local banks' perspective, it is risky to take on
too much in deposits from a single company," the official said,
declining to be identified due to the sensitivity of the matter.

Added an asset manager at a South Korean financial firm,
"Samsung typically put their cash in deposit products and rolled
them over on maturity, but banks started offering absurdly low
yields starting in the second half of last year, rates at which
they were basically saying that they won't take the deposits."

Samsung's growing appetite for domestic bonds has provided
support to shorter-dated local debt, dealers said, especially
for two- and three-year bonds.

"There had been concerns about whether the market can digest
the supply of bonds issued by local banks, which has picked up
recently due to a series of debt maturities in May," another
local bank official overseeing bond issuance said. "But those
worries have dissipated as Samsung has taken big chunks."

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